Tax return obligations

Question from wayne updated on 4th October 2019:

There are loads of questions in the archives but I could not see one relevant to me. I have lived in Australia for 14 yrs and I have a rental in the Bay of Plenty in New Zealand. I have not submitted a tax return in New Zealand at all during that time. I am now considering submitting a tax return.  So my questions are: 1) What advice do you have regards submitting a return? 2) What information would be required by the IRD?


Our expert Matthew Gilligan responded:

The key point is that irrespective of your tax residency status, if you own property in New Zealand that is producing rental income, you have an obligation to file a tax return here. You need to file a tax return for each year that you have derived income that is sourced in New Zealand.

To file these tax returns you will need to ascertain your New Zealand sourced income (i.e. the rental income from the property and any other income that you may have derived from a New Zealand source) and the expenditure associated with that income. Expenditure that you can claim deductions for includes interest on the money borrowed to buy the property, rates, insurance and property management fees.

Note that if you are a non-tax resident (which would appear to be the case) there can be limits on the amount of interest you are able to claim. If your rental property has been profitable, not only will you have tax to pay but you will also incur interest and late payment penalties because you will be late in paying the tax. On the other hand, if the property has produced tax losses, it is to your advantage to file tax returns so that the losses can accumulate and carry forward.

Given the issues here I would highly recommend that you employ an experienced accountant to assist you – not only in calculating the rental profit or loss that needs to be returned, but also to liaise with the IRD in the hope of mitigating any tax and penalty cost that may arise if the property has been profitable.

Matthew heads GRA's specialist property and asset planning division. He helps clients create optimal tax structures and build wealth through property. He has an extensive buy-to-hold property portfolio, is currently involved in over a dozen developments, and is author of two books - Property 101 and Tax Structures 101.

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